Base of Pyramid: The brave new marketplace of 4 billion customers, entrepreneurs and workers

By Jack Sim, founder of World Toilet Organization

The world has 7 billion people, yet almost all goods and services are designed and delivered to only 3 billion — the Top of the Pyramid, the rich and middle-class consumers. The other 3 billion — the Base of the Pyramid or BOP — are excluded from our formal economy because they are considered too low an income group to be attractive enough for businesses.

This state of affairs was caused by a tremendously attractive business environment in the past two centuries where producers focus on the Top of the Pyramid. However, in a globalised world where the speed of product penetration into developed markets have reached almost saturation point, businesses are finding it very hard to make a profit. Big successful firms are buying up smaller ones and the competitive disparity is making it harder for SMEs and MNCs alike to fight for survival. The myth of High-Tech = High Profit has now mutated into High-Tech = High Obsolescence.

In this struggle, the BOP of 4 billion new customers suddenly becomes attractive. China is now investing in Africa at an unprecedented pace, buying their minerals and exporting its excess workers to Africa to create jobs. These highways, power plants, and other major infrastructures are already bringing economic growth to 52 countries in Africa, helping it grow at an average rate higher that what Asia is experiencing.

China and India, which are still largely countries with high poverty, are now investing into their poorer regions both to develop them economically and also to help stabilize the discontent using better wealth distribution.

According to the UNDP, the BOP is worth USD5 trillion a year. So if this marketplace is so attractive, why is it still an under-exploited opportunity?

One of the reasons is that businesses do not understand this new marketplace well enough. For a long time, the image of the BOP was presented to the developed world wrongly by charitable NGOs who portray the poor as Hopeless, Helpless and Useless People. In their effort to solicit funds, NGOs often show pictures of very pathetic children in need so that it tucks at the heart-strings of the donors. This creates a negative image of the poor which is detrimental to both their self image and also causes misunderstandings about how entrepreneurial and resourceful they are.

At the same time, many businesses have the misguided idea that you can just go into this marketplace and sell them cheap stuff. The reality is if we really want to develop this BOP marketplace, we must involve the poor as our distributors, franchisees, employees. We must give them income that in turn increases their spending power to buy your goods.

Singapore is a good example of a BOP economy which turned into a success story. In 1965, Singapore was poorer than Cambodia and the Philippines. We did not get out of poverty through relying on welfare or donations. In fact, Singapore’s first Prime Minister Lee Kuan Yew’s first mantra was “Nothing is For Free”. You have to work for your meals. The emphasis was to create jobs and income through attracting foreign investments, vocational training, and basic health and housing/water/sanitation programs.

Today, we see the end result of a positive experiment in BOP marketplace: Singapore ranks 3rd highest GDP per capita behind Qatar and Liechtenstein.

To capture this historic market opportunity, I’ve set up the BOP HUB to create a new industry pillar for Singapore to serve the global BOP community:

– BOP HUB will serve as a Social Business Accelerator /Shared Services Center. Most social enterprises are under-staffed, under-resourced and fire-fighting on a daily basis. This is a Social Business Process Outsourcing service to free the social entrepreneurs from all his non-core work so that he can focus on his core competency and can scale up his impact without scaling up his organization proportionately.

– A BOP World Design Center (see picture above). This 65,000 sq ft industrial building is situated at Ubi Road 4 near the heart of Singapore with an MRT station coming directly to our front door in 2016. Our building will be complete in 2014. It’ll house all BOP activities and coordinate with the rest of the centers to integrate Social Businesses. This will cut wastage in time, effort, and resources.